Pfizer's CEO Says His Company Has a "Very Big Balance Sheet" to Do Deals. Here's the Perfect Next Acquisition Target for the Pharma Giant

Pfizer's (NYSE: PFE) shares have significantly underperformed broader equities over the past three years. The company's reliance on its coronavirus portfolio has been a weakness, as vaccination rates have declined, while U.S. regulators have made it harder for patients to access COVID-19 vaccines, even when they want to. Pfizer has tried to move beyond this problem. The company has expanded its pipeline through acquisitions.

However, there could be even more buyout deals on the horizon for the drugmaker. Pfizer's CEO, Albert Bourla, recently boasted about the company's "very big balance sheet" and ability to pursue potentially transformative acquisitions, if need be, even after spending quite a lot on buyout deals over the past few years. If Pfizer decides to buy another company, several candidates would be particularly attractive, including Kailera Therapeutics (NASDAQ: KLRA). Here's why.

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Deepening its weight loss portfolio

Like many pharmaceutical leaders, Pfizer recognizes the large and growing opportunity in the anti-obesity market. The drugmaker tried to develop several weight-loss medicines in-house, but for the most part, they were failures. Last year, Pfizer made an important move to bolster its position in this market: It acquired Metsera for up to $10 billion, including potential milestone payments. Metsera's lead asset, MET-097i, aced phase 2 studies. This medicine is now in phase 3 clinical trials. But what if Pfizer were to expand its weight-loss portfolio further to increase its chances of dominating this rapidly growing niche of the industry? Acquiring Kailera Therapeutics could help it do that.

Kailera, which recently went public, boasts several attractive candidates for weight loss. The most advanced is ribupatide. What is noteworthy about this investigational medicine is that it mimics the actions of two separate gut hormones: GLP-1 and GIP. Some believe stimulating both hormones offers advantages not seen with medicines like MET-097i, which mimic only GLP-1. In fact, the current leader in the weight-loss market, Zepbound, is a dual GLP-1 and GIP agonist that has overtaken Wegovy, a single-pathway medication.

That doesn't guarantee that every dual GLP-1/GIP agonist will be successful. But if Pfizer were to acquire Kailera Therapeutics, including its leading candidate, ribupatide, the pharmaceutical leader would have a significantly stronger, more differentiated weight-loss pipeline. That becomes even more evident when we look at Kailera Therapeutics' other candidates. Kailera Therapeutics is developing an oral version of ribupatide.

Currently, no oral dual GLP-1/GIP agonist is approved for weight loss, even though oral anti-obesity medicines are seeing strong success. Pfizer already has some oral candidates, notably through its acquisition of Metsera, but adding oral ribupatide might be a significant improvement.

Further, Kailera Therapeutics is developing KAI-4729, a medicine that mimics the action of three gut hormones: GLP-1, GIP, and glucagon. No such medicine is approved, but at least one is in late-stage studies, and it has posted what look like best-in-class efficacy results. We won't know for a while whether Kailera's KAI-4729 can match that, but the point is that its triple pathway approach has shown strong promise.

That's why it would be a great addition to Pfizer's portfolio in the case of an acquisition. Now, it wouldn't be cheap for Pfizer to buy Kailera Therapeutics. The biotech's current market cap is $2.7 billion. Kailera's shareholders will certainly demand a significant premium, especially given the company's promising candidates in one of the industry's fastest-growing therapeutic areas. But if Bourla is right and Pfizer does have the funds to pull it off, it may be worth it.

Is Pfizer stock a buy?

We can't be sure that Pfizer will acquire Kailera Therapeutics. So, we should decide whether the company's shares are attractive independently of that. True, the drugmaker's financial results haven't been great, and it also recently suffered a clinical setback. Pfizer's sigvotatug vedotin failed to meet its primary endpoint in a phase 3 study in patients with lung cancer.

Even so, there are good reasons to be optimistic about Pfizer's future. Despite this setback, the company's pipeline, especially in oncology, remains deep, and over the next few years, we should see significant clinical and regulatory progress from Pfizer. It could also establish itself as a leader in the weight-loss market with just the candidates in its pipeline.

Also, several of Pfizer's medicines are performing well, including newer ones such as Abrysvo, a vaccine for the respiratory syncytial virus. Lastly, Pfizer has maintained its dividend program intact despite recent challenges, and it offers a juicy forward yield of 7.1%, making it a top pick for dividend seekers. It will take some patience, but investors who purchase Pfizer's shares today may be glad they did so down the line.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.